Why This T-Mobile Bear Is Throwing in the Towel and Upgrading the Stock

T-Mobile stock has declined 6% this year. (Roman Tiraspolsky/Dreamstime)

Key Points

• KeyBanc Capital Markets upgraded T-Mobile stock to Sector Weight, citing a neutral risk/reward balance after a 6% year to date decline.
• T-Mobile reported strong third-quarter earnings and subscription growth, raising its year-end forecast for core adjusted earnings.
• Analyst Brandon Nispel believes concerns about increased competition from Verizon, following its leadership change, are overstated.

T-Mobile US stock caught an upgrade on Tuesday, as the KeyBanc Capital Market analyst thinks shares look more attractive at current levels following a selloff driven by competitive fears.

Brandon Nispel upgraded shares of T-Mobile to Sector Weight from Underweight and removed his previous price target of $200. Even though Nisepl says he still sees structural, cyclical, and company specific challenges ahead for T-Mobile, “the risk/reward appears neutral at these levels.”

T-Mobile reported better-than-expected third-quarter earnings and revenue on Oct. 23. The wireless carrier also posted strong subscription numbers and raised its year-end forecast for core adjusted earnings before interest, taxes, depreciation, and amortization. Still, shares have dropped 6% this year—their worst year to date performance since 2021 when they fell 18%—while the S&P 500 has climbed 16%.

Some telecom investors have concerns about competition, especially after Verizon Communications announced a leadership transition earlier this year.

Verizon said on Oct. 6 that it was appointing Daniel Schulman as its new CEO. Verizon also said that with this new transition, it would focus on maximizing value propositions, reducing costs, and delivering sustainable long-term growth for shareholders. The company also announced last month that it would be cutting over 13,000 jobs as it looks to “significantly reduce” outside labor costs.

The concern for T-Mobile investors is that changes at Verizon could make competition more intense. KeyBanc’s Nispel has his doubts.

“Reports of a resurgent and more price-aggressive Verizon appear exaggerated,” he wrote in a research note.

“Most industry observers have been worried about competitive responses from Verizon, including the impact on T-Mobile, while noting T-Mobile’s own aggressive promotional offers,” he wrote. “Our own personal experience has suggested that T-Mobile utilizes these promotional tools to drive traffic, and the Company prioritizes upsell.”

Shares of T-Mobile were up 0.5% to $207.50 on Tuesday. The S&P 500 was up 0.4%.

Write to Angela Palumbo at angela.palumbo@dowjones.com